Watsa Makes Second Big Greek Investment

Fairfax Financial Holdings Ltd (TSE:FFH) has acquired a 5 percent stake in Greek industrial firm Mytilineos worth €30 million, as first spotted by Harry Papachristou for Reutersand reported in official filings. This is Fairfax Financial Holdings Ltd (TSE:FFH)’s second major Greek purchase this year, and one more in what is becoming a clear trend of Western funds investing heavily in Greece.

Greek companies likely to rapidly gain value

“We continue supporting Greece and believe that the country has made great progress in dealing with its serious economic issues,” said Fairfax Financial Holdings Ltd (TSE:FFH) CEO Prem Watsa in a filing statement.

The logic behind these investments is that the worst of the sovereign debt crisis has passed, so any Greek company that has made it this far through the crisis is unlikely to go under and should rapidly gain value as the Eurozone finally recovers. Although there are still bears predicting an eventual break-up of the euro, even they would concede that it won’t happen in the next few years. Finding specific companies in Greece is largely a matter of determining who is best positioned to benefit from the next few rounds of privatizations. Among other things, Mytilineos is involved in producing electricity and building power plants, both of which could benefit from a privatized and de-regulated domestic energy sector.

Watsa further stated:

Under the leadership of Prime Minister Antonis Samaras, we continue to support Greece and believe that the country continues to make great strides towards addressing the key areas of its economy, thus encouraging foreign investment and creating a positive momentum that will foster increased employment and infrastructure development. Within this context, we have decided to strengthen our alliance with Evangelos Mytilineos, Chairman and CEO of MYTILINEOS Group, one of the most prominent industrial groups in Greece and the region. We believe MYTILINEOS Group, under the leadership of Evangelos Mytilineos’, to be one of the best run companies in the heavy industries sector and that they will continue to be a key player in the development of the Greek economy and its infrastructure. ”

Watsa has made his name as a value investor

Watsa has made his name as a value investor, and while he’s gotten a lot of flak recently for being incredibly bullish on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), he also made huge profits shorting the U.S. housing market before it crashed and has a reputation for finding deals that other people miss. But with Japonica Partners, Third Point, and Paulson & Co all buying Greek equities en masse, he’s not really going out on a limb with this purchase.

“Hedge funds, vulture funds and private equity funds foresee developments in the local economy that others will not realize until later, with a key factor being government plans for privatizations,” Greek journalist Anestis Dokas recently wrote in an article about Paulson & Co.

Fairfax Financial Holdings Ltd (TSE:FFH) previously announced that it would increase its stake in the Greek property development company Eurobank Properties from 19 percent to 41 percent for €20 million and has talked about investing in National Bank, the county’s biggest lender, although nothing has come of it so far.